UP012: FreshFry // frying oil purification through the magic of chemistry

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Jeremiah Chapman: 00:00:00

This is the best place to be for us for a long term vision of what we want to be there. Other hot cities, and you could be in Denver, you can be in several places in Texas, Jacksonville, Atlanta. You can be in any of those places and have a really good start, but Louisville is positioned to remain the franchising capital of the world.

Jay Clouse: 00:00:22

Startup investment landscape is changing and world class companies are being built outside of Silicon Valley. We find them talk with them and discuss the upside of investing in them. Welcome to upside.

Eric Hornung: 00:00:50

Hello. Hello. Hello and welcome to upside podcast. We’re finding upside outside of Silicon Valley. I’m Eric Hornung and I’m accompanied by my cohost, Mr. top 12 newsletter himself, Jay Clouse, Jay. How’s it going man?

Jay Clouse: 00:01:05

It’s going great. Made the top 12 newsletters to read I guess by a Weber’s blog. It’s just a blog post by some guy, but you know, it’s nice to wake up to someone tweeting at you and saying, Hey, you made this top 12 list. Feels good.

Eric Hornung: 00:01:22

Shout out to A Weber. Also, shout out to Jay because the same day that came out, he sent out a newsletter saying he was just done for a while.

Jay Clouse: 00:01:31

That’s true. That was a complete. I saw that too and I was like, man, does that mean I have to get back into writing? Yeah, taking a, taking a nice little break. Got a lot of other projects on my plate right now. I want to take a pause on the daily writing because it was stressing me out and uh, that’s the day that I had more single day subscribers than any day in the last several months. So, great

Eric Hornung: 00:01:52

Trust the position It’s to its fullest. Oh my goodness. Well, Jay, why are we here? What are we doing on upside?

Jay Clouse: 00:01:56

On the upside, we’re talking to founders outside of Silicon Valley, founders who are building impactful companies with upside investible companies with upside and doing so in what many people have historically considered a geographical disadvantage and we’re doing that.

Eric Hornung: 00:02:13

and were doing that in an interesting way. Our podcast has three phases and upfront and interview and a debrief and our upfront. We’re going to discuss some of the research we did around the industry and competitors, maybe some questions we have about the company in the interview. We’re gonna. Ask a bunch of questions with the company. We’re going to learn about the founder of the company and the industry and in the debrief. We’ll we’ll get to that later. Would that being said, Jay, who we’re talking to you today.

Jay Clouse: 00:02:41

Today we’re talking to Jeremiah Chapman, the founder and CEO of FreshFry. Jeremiah has been on the Forbes 30 under 30 list in manufacturing and his expertise, his background includes nanotechnology, adsorption, and chemical manufacturing.

Eric Hornung: 00:02:41

He sounds Smart.

Jay Clouse: 00:03:00

Yes. Yes. Eric, have you ever heard of adsorption versus absorption?

Eric Hornung: 00:03:04

So I have not, but I used to work out when I was younger and there’s the abductor and a Dr Machine, so same route. I’m guessing one is in one is out. Maybe

Jay Clouse: 00:03:15

glad to hear that you’re working on your hip flexors. Yep. Yes. Adsorption, uh, which is what I had been familiar with previously is the process in which a fluid is dissolved by liquid or a solid and adsorption. What Jeremiah’s background is in is the adhesion of Adam’s ions or molecules for my gas, liquid, liquid or dissolved solid to a surface. This process creates a film of the absorbent on the surface of the absorbent, so FreshFry. Why this is relevant. FreshFry is a packet that you drop into a deep fryer that uses adsorption kinetics to cleanse oil being used in these deep fryers. It extends the life of the oil in restaurant deep fryers, which Jeremiah says reduces the cost to the restaurant every year and extends, extends that life, makes the food taste like the oil is clean and fresh.

Eric Hornung: 00:04:13

Adsorption also sounds like a advertising agency and a cartoon.

Jay Clouse: 00:04:20

It’s the Ad Consortium, a love it, so FreshFry based in Louisville, Kentucky, found it, and in 2014 to this point, they’ve received about $20,000 in funding. They have customers of the KFC yum center and the Papa John’s Cardinal Stadium, which I want to talk to here in a moment and I’ve also found, and I’d love to hear if you found research as to the market size, but I had $4,000,000,000 on the oil filtering market. Do you have any other pieces of research?

Eric Hornung: 00:04:53

So I think we might’ve found the same piece of research for that $4,000,000,000. I tried to do some additional digging to kind of triangulate and understand where that number came from, but it was one report and that was all I could find, so we’re going to run with that $4,000,000,000 number for now.

Jay Clouse: 00:05:09

This is an interesting guest and product here on upside. This is getting into more science that we’ve done to this point, and this is not your typical flashy consumer app or a website. Jeremiah says, my team and I have created this product. We sell it directly to restaurants. We know notice the problem restaurants have. We can just very straightforward save the restaurant. I think $550 is the number I saw on their website, $550 per fryer per year on average saved and I would say promising to me is that they’re working with the KFC yum center and the Papa John’s Cardinal Stadium, both in Louisville is home home city, but those are two major, major arenas and it would have reason to believe that if those two major establishments are using FreshFry that he will be able to find other customers.

Eric Hornung: 00:05:59

So one thing that’s interesting to me is kind of the market trends and market dynamics. This is obviously a $4,000,000,000 market from what we saw. I can’t tell if it’s growing or shrinking. Are more companies, more restaurants using fryers are. Is there less being used? I’m not really sure. Did you find any research on that?

Jay Clouse: 00:06:20

I didn’t. That’s a great question. That’s something that will add to our list and make sure we asked Jeremiah about.

Eric Hornung: 00:06:24

Because I’ve found that there’s a lot of salad places popping up and not as many classic Burger joins spitting out thousands of burgers a day. So it appears to me that this could be a declining market, in which case that’s very interesting, but you’re also dealing with a commodity directly. So commodities in general have been one of the worst performing assets in the world in the last probably one to five years. So right now you are sitting with oil prices, peanut oil prices down something like five percent in the last six months. So there’s two interesting drivers there, right? There’s the macroeconomic trend driver of people eating healthier and then there’s the price driver which is saying, okay, things are getting really cheap in the commodities business. So does that spur demand for this product which is going to increase your oil or not versus if that peanut oil were spiking, every restaurant would be thinking about the price of oil and how to extend the life on that oil.

Jay Clouse: 00:07:30

That’s a good point. That’s something I hadn’t thought to. Great. Great Research. My dear Watson big fan of that. I would assume that as long as they are continuing to help extend the life of oil, whether that $550 per fryer per year, it goes down to $300 per fire per year, probably still worthwhile depending on how many fryers you’re dealing with, but that’s, that’s great thinking and I’m excited to hear from Jeremiah on that. So Eric, what did you find in the way of how this market is segmented or broken up?

Eric Hornung: 00:07:58

So I want to think about that in two ways. The customers and the competitors, the customers. I couldn’t really find much information on peanut oil or canola oil usage by type or anything like that. My intuition tells me that fast food chains and McDonald’s of the world, the Burger kings of the world are going to be the largest driver of that. So if you can get this product into a fast food chain holistically, it’s going to be very valuable. That being said, their franchisees so they could be technically independent and you’d have to sell to every single one. When we look at the competitor’s side of things, I believe that this is a very fragmented business. There’s a process called oil filtering. I believe that’s a little bit more expensive and an alternative to this and I really want to hear from Jeremiah the difference on these two, but that is a service that I believe is an extremely fragmented offering. There’s, I don’t know if that there’s a national provider of it. I think it’s something that has been done for years and years and years and it’s a way to kind of clean up your oil real quick to maybe extend the life a little bit. Kind of like retreading a tire almost.

Jay Clouse: 00:09:08

And that’s oil filtering market is where I found that $4,000,000,000 number from

Eric Hornung: 00:09:13

right. Same. So if I were a competitor, I would care a lot about targeting those large chains because the economics make a lot more sense. The independent restaurants though. The. What’s your favorite independent restaurant in Columbus Jay?

Jay Clouse: 00:09:31

Im a big fan of Northstar A big fan of El Camino.

Eric Hornung: 00:09:34

El Camino definitely sounds like they fry things. Didn’t really help me out there with northstar though.

Jay Clouse: 00:09:38

No, definitely not. Northstar does not fry things,

Eric Hornung: 00:09:40

but if el Camino wanted to get their oil filtered then they’d probably have to reach out to one of these contractors. The contractors probably are not reaching out to them, so I think that these kinds of pods serve as a way to sell directly to independent businesses in terms of a product, not a service. I’m really excited to hear from that.

Jay Clouse: 00:09:59

I would assume they could go into like a gfs or whatever those companies are that sell all kinds of things, these independent restaurants, things like even the stand that you see on the table that marks their specials, you know?

Eric Hornung: 00:10:11

Yeah. What are some other things that you’re excited to talk with Jeremiah about?

Jay Clouse: 00:10:15

Well, Jeremiah just recently pitched in the rise of the rest competition in Louisville did not win first place, so interested to hear his perspective on that competition and why he thinks he did not win first place. I’m also interested to hear from him about the technology itself and how it is protected. Last thing that I saw was that it was patent pending, which is good news that they have something proprietary and it gets to be protected, but it is not yet totally patented from what I can see, but yeah, that’s all I had. Any last thoughts from you?

Eric Hornung: 00:10:45

when you went to by south by southwest this year? You sent me a text message about the importance of something being patent pending or having a patent. Can you talked a little bit in the investor’s circle?

Jay Clouse: 00:10:54

Hm? Yeah. I went to a talk at south by on investment and what this investors thesis was and what he looks for in both his presentation. Then a followup conversation I had with an investor. They both were very adamantly only investing in things that did have protectable technology in some way and that’s not to say that they don’t invest in software, they they. Their view is that that should also be patented, so that really got me thinking and considering more strongly patents and the protection you can put around things because it becomes more of an acquisition target because as a small company you pay the money for the patent but you probably still don’t have a ton of money for the litigation if that patent got challenged or if you had to enforce it, but when you’re being vetted for acquisition, those companies can spend a ton of money and put more resources behind looking at that patent and seeing where the strengths and weaknesses can be or how they can shore it up and defend it and they have the resources to do so. So that was something that I did take away from south by was how much of an emphasis from investors I heard on patents.

Eric Hornung: 00:12:03

Awesome. Well, I’m excited to talk to Jeremiah. Unfortunately I’ll be hopping on an airplane. So Jay is going to take this interview Solo.

Jay Clouse: 00:12:13

Yeah. I’m going to have to do all the hard questions. I’m going to have to do my own back of the Napkin math while Eric is some number of thousands of feet in the air.

Eric Hornung: 00:12:22

Well, I’m sure that you will do an incredible job and I look forward to listening and talking to you and the debrief.

Jay Clouse: 00:12:29

Yup, Yup. Absolutely. All right. I’ll go talk to Jeremiah.

Eric Hornung: 00:12:29

Alright bye

Jay Clouse: 00:12:36

Jeremiah. Welcome to the show.

Jeremiah Chapman: 00:12:38

Thank you for having me. I appreciate the opportunity.

Jay Clouse: 00:12:41

So you’re running a company, your Forbes 30, under 30. Tell me a little bit about the history of Jeremiah and how you got to this point.

Jeremiah Chapman: 00:12:52

So I’m born and raised in Louisville, Kentucky. I’ve been here my entire life except for a couple of stents in a few cities where it just didn’t work out for me. My background is in chemical engineering, but I’ve always had a passion for cooking actually. So that’s something that me and my grandmother we would, we would do all the time together. We would all the other kids are playing around I’d being in the kitchen, helping her, and that’s really where I got my idea of being a chemical engineer where it’s a lot like cooking to me. You’re taking raw materials, you’re putting them together and you’re making something different and valuable to the world. So from there I studied at the University of Louisville. I got my undergrad and graduate degree at the same time which had to rush through and from there I spent pretty much a whirlwind, actually had no idea that I’d be starting a company, had no idea that I was so passionate about fried food, which is kind of hilarious at some points. It’s been a whirlwind for me. Just just really my perspective has shifted from within a couple of blocks to having a global perspective now within the last 10 years. Never expected to go to college honestly. So when I say that I had no idea that I would really be starting a company. It’s, it’s, it’s something something different.

Jay Clouse: 00:14:16

How did you make that leap from cooking to chemical engineering? In hindsight it makes some sense, but what was your first interaction with chemical engineering as a possibility?

Jeremiah Chapman: 00:14:28

This is a strange one because I almost failed chemistry in high school, but then during the last two years I increased my grades enough to get a scholarship and I needed a major that was pretty straightforward where if I graduated I’d be making a decent amount of money because I needed to make sure that as some people would say secure the bag, but I. I really need it to make sure I could provide as quickly as possible in chemical engineering was at that point the highest paying engineering job and so I just went for it.

Jay Clouse: 00:15:02

And so when you’re starting to take these chemical engineering classes, what is the moment or what is the idea that you’re learning in these classes that you’re like, you know what, actually I really like this.

Jeremiah Chapman: 00:15:13

Well, the idea that I learned the most is first you had to. I had to reconcile with that. I was in a chemical engineering class and don’t leave. Don’t leave. Don’t leave. Even though it’s difficult is as soon as you’re committed to staying in that classroom, that the main idea that you’re learning is here is a thought process. Stick to this process. Don’t worry about this is the answer versus this is the answer. It’s having a logical process that you develop in, you stick to throughout the entirety of your college career. I firmly believe that in all engineering disciplines, you learn that process and about two years, the next two or three years is making sure it’s, it’s solid and you don’t shake from it.

Jay Clouse: 00:15:58

Okay, so fast forward a little bit. You at some point learn whatever process is possible for FreshFry. Can you talk to me about the genesis of that idea and how you came to this adsorption product?

Jeremiah Chapman: 00:16:16

Yeah, sure. So when I was studying my, I had an independent project where I would take old oil from all the restaurants on campus and make biodiesel and really my heart has always been with alternative fuels because I’m cheap, so I wanted to find something that would help a lot of people spend less money because I just could not stand filling up at gas stations. So as I began to make biodiesel, I was using an absorbent product that was really difficult for me to get out. It would get an our fuel filters and I really didn’t want the liability of messing up the shuttle service for the University of Louisville. So instead I created my own product to help me clean the oil in an easier way and that’s how the fresh dry material started. But it was another year to year and a half where I thought I had the perfect product and the restaurant was telling me something completely different.

Jay Clouse: 00:17:22

Let’s back up a little bit here. You’re talking about the shuttles and the University of Louisville campus. Were you working with the University of Louisville in their shuttles on something?

Jeremiah Chapman: 00:17:29

No, it was my own personal project. I just needed somewhere to put the bio diesel. So they happily accepted in blended to a, B, five or b, 10 blend for me.

Jay Clouse: 00:17:39

So you were, you were working with this old oil and making biodiesel when you said, hey, I need to test this in some sort of vehicle, and the university said you can try that on one of our shuttles.

Jeremiah Chapman: 00:17:48

Well yeah, they were definitely open to those types of things. So I really, I was really appreciative of, of that. Yeah,

Jay Clouse: 00:17:55

that’s really cool. And so through that process you saw that there was something about this fuel that was getting stuck into filters and so you started trying to clean that, that biodiesel that you’re putting into the shuttles.

Jeremiah Chapman: 00:18:09

Yes. So what it was is you’ve got, you’ve got gross oil, you send it through a process and then you’ve got crude biodiesel, now you have to wash it and you can take, use a ton of water and I liked long process or you can what is called dry wash it by putting adsorbents in, and it sucks up all the bad stuff. And then you could filter that out. So I was using a dry washing process, but I couldn’t get all the powder back out, so that became a big issue because if you’ve got solids in there, it’s going to end up somewhere in your system and your bus. So from there I needed to find something that was just as good at removing all of the impurities but was big enough to get out really easy. So that’s where the material started.

Jay Clouse: 00:18:58

Gotcha. So this is kind of where the first idea of cleaning oil by adsorption was starting.

Jeremiah Chapman: 00:19:04

Yes.

Jay Clouse: 00:19:05

Can you, for our listeners define adsorption? I try to do my best in the intro to this show and we’ll see how close I was.

Jeremiah Chapman: 00:19:15

So you’ve got an absorption and adsorption adsorption is when you’re actually intaking whatever you’re. Whatever you’re bringing up. Adsorption is all surface level. So imagine you want to. You’ve got a a sponge. The entire sponge will adsorb moisture. But if you want something to adsorb, imagine putting glue on paper and then putting glitter on it. So the more surface area you have. So if you coat a baseball with glue and roll it in glitter and then you co a wiffle ball and glue enroll it, notice that now the glitter goes on the inside. So that’s, that’s what adsorption is. It’s really a surface area chemistry. And you’ve got. You’ve got multiple modes of adsorption, but that’s the main difference. One is soaking something up and one is attaching to it.

Jay Clouse: 00:20:05

Did you have mentors at this point who were helping you learn some of this stuff? Or helping you even make the ask of the university to, to use their shuttles on this or how did you find the agency to try these things?

Jeremiah Chapman: 00:20:20

Well, I would say there was one professor Gerald willing who was no pun intended, willing to help me, and he had a engineering student who was in the professional industry at that time when I decided to take on this project, but he did something really similar and he made himself available to walk me through going from a concept to here’s what you’re actually going to do. So it was really two people, one person who helped me at the university level and another student who came back to help a another I guess an alumni came back to help, a current student and just setting something up. So those two people did a lot for that.

Jay Clouse: 00:21:05

So it’s clear. Knowing what I know about you running this business now, this was the beginning of you starting an entrepreneurial journey here. What was your first touch point with entrepreneurship to know that that was even a possibility for you?

Jeremiah Chapman: 00:21:21

So my. My first touch point with actually I worked on this project. I worked on several projects throughout college with a good friend of mine, Alex Fromire and we started a company in college called Acre Advancing Kentucky’s renewable energy. And I used to try. I would try to take water heaters and make them into reactors. I was always doing some odd things like that growing algae to see what kind of strain, what produced the most oil, again, a bio diesel all the time. On all my free time. But my first experience with entrepreneurship for myself was actually when I graduated, so what was really going on is I had the engineering part down. I wanted to be the smart guy, but the hard transition was not all of these things can just be a hobby. So I had to really understand what it took to take an idea to a business concepts. You have to think of more than just the tech. And that happened in 2014 when I was a recipient of the vote awards here in Louisville, Kentucky

Jay Clouse: 00:21:21

And what are the vote awards?

Jeremiah Chapman: 00:22:31

vote awards. That is a an accelerator program where it sends you through, and I’m sorry enterprise core, if I get this wrong, but I believe it’s an. It’s an eight week process. It could be 12, but I was flying by the seat of my pants so it felt like eight. And what they do is they prep you business model, canvassing, minimum viable product, product market fit. Really all the things that as an engineer, I’ve never really taught what we. What we did in engineering school was if you want to create a business case, assume that you’ll get 10 percent of your market, so the hard stuff up in the beginning, never expect,

Jay Clouse: 00:23:09

just assume you’ll get 10 percent of the market.

Jeremiah Chapman: 00:23:11

Yeah, and I always thought, yeah, that’s 10 percent, just 10 percent. Let’s ask for 100, but no one tells you that. Getting started is the is so hard.

Jay Clouse: 00:23:23

That’s wild. Okay, so you win this award and you’re saying, I think I can make a business out of this. What was the decision to make that leap and follow that path?

Jeremiah Chapman: 00:23:32

That was 2014. October of 2014. I went into this program with a the concept, so never really put it in the back of the restaurant yet. From there, worked on it nights and weekends. I was. I graduated in 2013, so I was a full time engineering professional all throughout 2015. It was nights and weekends really putting in about 20, 25 hours a week on it, along with a 50 to 60 hour week at my normal job. But it was February 2016 where I realized that I was in my own way, I could not do anything else for this company because I had no more energy. So at that point I went to my then current employer and said, hey, I’m leaving. And they said when I had no idea, so I said April first or April 15th, because it was April fools and tax day. So those are the only two dates I could remember, but I was freaking out thinking, dude, what are you doing? You have one customer who’s paying you sometimes 25 to 30 bucks a month and you’re, that’s worth leaving everything that you’ve worked for everything as you put your effort in. Because it was just, it was, it was, it was wild.

Jay Clouse: 00:24:57

And this is probably a good time to transition. Can you explain in your words the problem that fresh fries solving?

Jeremiah Chapman: 00:25:04

Yeah. So restaurant spend about 80 billion dollars per year on frying oil and it’s because frying oil just goes bad. And the processes that people use today, similar to what I was using long time ago at University of Louisville, it’s difficult. So I decided to come up with something easy and simple and still cut those frying oil costs and half so they’re spending less money, but it’s a process that’s easier to adhere to and it values the labor so you can focus on what’s most important, which is your food.

Jay Clouse: 00:25:38

Can you explain how fresh fried does that?

Jeremiah Chapman: 00:25:44

Yes. So FreshFry has a patent pending pod called the fresh rock pod you place into a fryer. You leave it in overnight, and what it does is it removes all of the dissolved impurities. You come in the next day, you remove the pot and your oil is clean, so now you can use the oil longer. And we’re using plants, so when you kick it out and throw it away, it’s not a real problem at all.

Jay Clouse: 00:26:04

So I can see how this is connected to the bio diesel experiments that you were doing at the time. How did you make the leap from biodiesel fuel to I’m going to focus on this opportunity within restaurants?

Jeremiah Chapman: 00:26:18

That’s a great question. So all throughout college I wanted to make biodiesel, but it was never made economic sense because I always had to pay for the feedstock and it rose and fell with diesel prices. What I decided is I had to somehow create enough value at the restaurant level to create a relationship to then get that oil when it’s old. So let’s walk up the value chain a bit and a little earlier. And that’s why FreshFry is in the restaurant right now.

Jay Clouse: 00:26:47

That’s fascinating. Can you tell me about the first time that you went to a restaurant and said, hey, I want your old oil.

Jeremiah Chapman: 00:26:54

Well, great thing about that is I said, hey, I want your old oil. They say please take it. Because sometimes they have to pay to get rid of it. Or the person who’s picking it up, it was a little late and it’s spilling everywhere. So they said, yeah, this is Kinda, it’s Kinda weird Guy Wants our oil. We don’t know what he’s going to do with it, but just give it to him. He seems nice. So that’s how I got started.

Jay Clouse: 00:27:18

So you’re just leaving this restaurant with a barrel full of old oil or paint. Paint the picture for me. Explain what? What’s happening here.

Jeremiah Chapman: 00:27:26

I can do that. I can tell you it was. It was in May. I was carrying two five gallon buckets from Wendy’s on campus all the way. I’d say it’s a good half mile to speed school and I’m walking around with two now. Let’s see. Thirty pounds in each hand of Greece shaking. I’m trying, trying to lug it across campus and I’m leaving a trail of old French fry smell because in a dead heat of summer I’m sweating. Everyone knows that this is odd because every student has a backpack on and I’m the one with two white buckets with greese kind of spilling out of it. Um, so I, I said, you know what? Never again, I’m going to drive these buckets next time. And then imagine having two, five gallon and then you hit the brakes and they spill her back seat. Had a 97 Pontiac Grand Prix that smelled like a Hash Brown. Until the day I left this earth.

Jay Clouse: 00:28:27

Oh my gosh. And so what’s v? Three? V One is walking the buckets. Vitu is putting them in the back of the Pontiac. What was V3?

Jeremiah Chapman: 00:28:36

Oh, V2. Just once you spilled oil. It’s like theres no turning back.

Jay Clouse: 00:28:39

Okay. There’s nothing else to lose. Yeah.

Jeremiah Chapman: 00:28:43

Yeah. V2 was just doing it.

Jay Clouse: 00:28:45

Okay. So you’re bringing this oil home from the restaurant. Walk me through the progression of where you realize that there’s an opportunity with cleaning their oil. For, for restaurants

Jeremiah Chapman: 00:28:58

So one, when I pick up oil I would pick up enough for the biodiesel reactor to hold and it was always less than what they had available. So I immediately saw they’re throwing away more oil than what I can process. second, the dry washing component that I was using to clean the oil they were using in the back of the restaurant already to try to extend the life. So I knew if I solved my problem for me, I can immediately apply it to the back of the restaurant. So what I did once the material was made on immediately went to the back of the restaurant and realize that everything I thought about the restaurant was, was not necessarily true. It is a fine tuned system back there. So if you change something, you need to be sure it fits.

Jay Clouse: 00:29:44

Can you talk more about that?

Jeremiah Chapman: 00:29:46

Yeah, sure. So actually the first place I went through that was off campus. This was, you know, I’m, I’m graduated now and so I, I, I leave campus. It was blind faith. And basically I thought I just go in and say, hey, here’s our product. It works, here’s what you do. And Chef Bruce, he pretty much taught me that they had their own system and if you, if you really want to be successful in the back of a restaurant, you can’t have restaurants changing their process for you. You have to fit their process, become a part of what they do, become a natural response. So instead of having just a material, we changed until into a pod that fits into a fry basket. So it tacks onto the already established habit of putting a fry basket into oil and then making sure you have a visual response to let them know what’s going on. And all of that was being developed right there in my cafe.

Jay Clouse: 00:30:44

That’s wild. So what was the process that you had envisioned in the first place that was not that process?

Jeremiah Chapman: 00:30:50

Oh, you walk in, you walk into like a Rockstar and say I’ve got this great solution for it. And they go, oh, we’ve always needed this. Thank you so much. You’re the greatest person ever. And you walk in, you go. They say, what is that? I don’t really want to put that in my oil. Like you’re, you’re a random guy and you want us to trust you with the most important part of our business, which is our flavor. Never thought of it that way. So I really had to find someone who is ready to push the envelope a little bit, really cares about the environment and then really give me feedback on hey, this is a great product or it’s not doing what I expected at all. So

Jay Clouse: 00:31:26

you just touched on something saying it was good for the environment, that part of the product was important to you from the beginning.

Jeremiah Chapman: 00:31:35

Yes, it was important to me from the beginning, but the hard lesson I learned is it’s important to others as well as long as they’re not paying a super premium for it. So I had to adhere to environmental responsibility with, I would say engineering integrity to make sure that we’re actually offering it at a market price that could be used to have an environmental positive impact.

Jay Clouse: 00:32:01

So if I’m reading between the lines, the first version of the product, it was environmentally sound, it cleaned the oil, but it wasn’t at a price point that the restaurant is willing to pay for a premium that’s basically covering environmental concerns.

Jeremiah Chapman: 00:32:01

Correct.

Jay Clouse: 00:32:18

Interesting. So when you heard that feedback, what did you go and do? How did you change the product and get it to a place where they were able to say, hey, I’ll try it and be. This is worth the cost.

Jeremiah Chapman: 00:32:28

So at at that point I said, okay, that let’s set. Let’s set aside the fact that you thought you had it and at this point I said I need a co founder, so I was doing this by myself, so I need someone who can help me look at the longterm vision of this business as I continue to grind on the, on the R and d of the product. So you go back and you look at all your levers that you can pull all of your costs levers and say which ones are we hard on that we cannot change this because this is what we stand for and here are the things that we need to spend more time on to pull those costs, levers, pull those costs down because we need it to work for the customer. So at that, that is a long process of making sure when you pull something it doesn’t impact how it performs in the market and still it adheres to the standards that you say.

Jay Clouse: 00:33:22

So is that cafe on campus? The first place that fresh for ipods were in the real world and production.

Jeremiah Chapman: 00:33:29

It was not on campus. It’s on market street, but yes, and we would at that point we could make two ish pods a day and they went through about $28 a month, so we spend half our time with them and then if we took on another customer but really pushing the envelope there. So. And I found that partnership I would say during the vote awards.

Jay Clouse: 00:33:55

What was the constraint of how quickly you could make these pods? What was slowing you guys down? What does that process look like?

Jeremiah Chapman: 00:34:01

So one thing, since it was during the voting wars, I was part time second, it was everything was handmade from how we would process the material to how we would make the container hold and assemble and then the coordination in between us in the restaurant was very disconnected because we were now a new vendor, so a new vendor had to find a slot that fit in with the restaurant because we didn’t want to disrupt too much. So from there start to finish, every single case that we sent out was about a two week process.

Jay Clouse: 00:34:37

Wow. Okay. So you have a two week lead time on getting this material to the restaurant. You’re coordinating with their schedule where you, were you providing this in kind as experimenting at the time or were they purchasing it from you?

Jeremiah Chapman: 00:34:49

So this restaurant, we trialed it for a couple of weeks and then we sat down at the table and they. So how much does this cost? And I said, how much are you willing to pay? And that’s. And then that’s how we sold our first case.

Jay Clouse: 00:35:02

So and so at this time is probably, I would imagine kind of obviously difficult. Had you left your full time job yet at this point? Or help me with the timeline here.

Jeremiah Chapman: 00:35:12

This was in 2015. So no, I had not left my full time job yet.

Jay Clouse: 00:35:18

What was the trigger for you to say? Because it sounds like this is the restaurant that was purchasing from you that you said, I’m going to leave my full time job to do this. What was that moment like for you? Why did you decide to make that leap?

Jeremiah Chapman: 00:35:31

I made that leap because we were finding great success with this customer and once I found a cofounder we could output this a little bit more. He was also full time at another company so we have some extra inventory and then we went and we went to a customer that had three fryers so we’ve now tripled our impact and they were ready to purchase and I didn’t have the time to make the material. So obviously for me that meant something’s got to give, something’s got to shake. We have no idea if they are going to stick with us forever, but we’ve got to do something and that’s where the transition happened.

Jay Clouse: 00:36:10

So you leave your job and you’ve got close to. Was that three clients you said that you were working with at the time?

Jeremiah Chapman: 00:36:10

Four fryers two clients

Jay Clouse: 00:36:21

four fryers two clients? What was that like? Tell me, tell me like what your head spaces are you thinking like, okay, I know this is going to be huge and I’m going to have a thousand clients or a thousand fires in the next year. It would just walk me through where your head was when you made that leap.

Jeremiah Chapman: 00:36:33

Yeah, so when I, when I made that leap, it wasn’t necessarily that I knew everything was going to work. It’s just the opportunities that I had in front of me required a lot of me and I had a decision to make if I decided to go one way or the other, which one would keep me up at night and it was if I stayed in my full time job and wondered if this thing would ever work, always told myself at the end of the day I can still be an engineer. Well right now, and I think let’s put on this hat and let’s run with it.

Jay Clouse: 00:37:04

So let’s talk about how big this opportunity is in front of you in front of FreshFry. How big is the whole market that you see that fresh fry is able to serve and how do you manage growth so that you can still handle interfacing with these restaurants and onboarding these restaurants?

Jeremiah Chapman: 00:37:23

Yeah, so the United States has about a million fryers in it, ungodly amount, which is great for us. And what I see is about 65 percent of that market, they don’t have an answer because they don’t have a filtration system, so we immediately plug in there fully believe that that market can get you to between 20 and $50 million top line annually before you really start to get some pushback and then you’re getting into the traditional filtration powder markets. But the way we need to manage growth is to become more than just a product. So the purpose of FreshFry was to create that value, create that relationship. So we need to go ahead and keep that in the forefront of our minds because we want to transition from the $4,000,000,000 to spend every year on this problem to the $12,000,000,000 from this problem. And also collecting the oil.

Jay Clouse: 00:38:18

Okay. Let’s talk more about that. How did you identify this $12,000,000,000 market and why? Why do you have your sights set there before? Just crushing the $4,000,000,000 market.

Jeremiah Chapman: 00:38:30

The $12,000,000,000 market is why fresh where I got into this in the first place to, like I said, create that relationship. But in order to crush the $4,000,000,000 market, you can’t just get lost in the shuffle of a me too product. So although I say keep the, keep the relationship in the forefront of your mind, it helps you make decisions today on what’s going to be important in the next five years. So if I’m worried about a certain distribution channel doing x, Y, and Z, I have to think, is that distribution channel going to be there in five years?

Jay Clouse: 00:39:03

So the $4,000,000,000 is an oil filtration market, is that correct? Yes. Okay. In $12,000,000,000 is what exactly?

Jeremiah Chapman: 00:39:12

So really with the oil filtration market, although the top 100 brands in the United States, they’re all using filtration. It’s about 25 percent compliance. So we believe that just having a better process will increase compliance. On average we start at 60 percent and we like to settle around 80 and some great customers are 9,100 percent, so that’s really nice. But you’re not going to get that everywhere. So people are actually using our product which grows that pile a little bit. And then there’s an extra four point 6 billion on the oil collection side, so once the oil is thrown away, that’s where the additional money comes from. So we’re growing the $4,000,000,000 spend annually and then we’re tacking on the four point six that’s within the oil collection side.

Jay Clouse: 00:40:06

Okay. So you’re saying what is the compliance? What do people need to be client compliant about?

Jeremiah Chapman: 00:40:11

Well actually using products that are on the market. So you’ll go to anybody who fries and they say, yeah, we use this product and then you back calculate how much they should be using and it’s about 25 percent of what they should be using. And you go to the corporate level and they say, yeah, we don’t really execute on that very well. We know that’s something we need to work on. We just can’t get our people to do it. So that’s really what. What’s going on there.

Jay Clouse: 00:40:38

Meaning they’re using oil that’s too old or oil that should not be used.

Jeremiah Chapman: 00:40:43

So some places do that. Yeah, they’re, they’re serving food out of battery oil. Other places their oil ifas then truncated a bit. So they’re tossing it away three, four times a week when if they had a good oil management process, it’d be once or twice a week so they could be saving a couple thousand bucks per location. So it manifests in several ways, but typically it’s either stretching your oil too long and having oil thats pretty gross or tossing way too frequently. So your P and l is getting hit pretty hard.

Jay Clouse: 00:41:16

Who is the governing body that sets this compliance rule forward?

Jeremiah Chapman: 00:41:21

Uh, there, there isn’t one actually. So are you talking from so regulation standpoint or are you talking at the restaurant and a restaurant brand?

Jay Clouse: 00:41:33

Well, when you say, when you say the word compliance in my head, I’m thinking there is some rule or some guidelines they need to follow that is put forward by some authority. But who are they trying to be compliant to?

Jeremiah Chapman: 00:41:46

So that compliance is always measured against what’s called a brand standard. So you’re with chick fil a brand standard is your chicken needs to be pressure fried in peanut oil. Your fries need to be cooked in open top fats and this way and we use these products filtering twice or three times a day and that that’s a brand standard. Now compliance is we go in and we measure it against the brand standard and it’s chipped away very quickly that some of it is reality. A restaurant can’t do everything at all times. Other parts of a. it’s really just the restaurant saying that doesn’t work for us. We’re just not going to do it because we’re in the trenches.

Jay Clouse: 00:42:26

Got It. Okay. So there they are failing to meet their own standards for whatever chain or restaurant that they’re a part of.

Jeremiah Chapman: 00:42:35

Correct. Correct. And obviously if, if there’s a standard, it’s really your lowest performer, that’s your real standard.

Jay Clouse: 00:42:42

Okay. I’m starting to back into understanding some of this math now. So $4,000,000,000 of oil filtration market right now, but only about 25 percent of those restaurants are meeting their own internal standards for what they should be doing with their oil.

Jeremiah Chapman: 00:42:42

Correct.

Jay Clouse: 00:42:58

So you’re saying using FreshFry makes you more compliant, which makes the overall spend on oil filtering products closer to the $12,000,000 number?

Jeremiah Chapman: 00:43:09

Yeah, closer to the 8 billion, yeah.

Jay Clouse: 00:43:12

Got It. Okay. And now you started talking about oil collection and this is adding the four point six, which gets it closer to this larger number. What does the oil collection market look like now? What’s that marketplace look like?

Jeremiah Chapman: 00:43:26

So that market place is really driven by. You have one national player, darling, that’s everywhere in the United States. You have several, I’d say about six or so sub national or regional that they conglomorate and have national service and then the remaining 280 places are all local haulers that maybe have six or seven people, two trucks. Very small, very driven group of people. But they could. They can’t serve as more than maybe a 200 mile radius. So if you’re a national brand, you’ve got basically two options and both of those options are completely fixated on let’s, let’s get as much oil as possible.

Jay Clouse: 00:44:13

This is Jeremiah. Would you say that your core customer is like a, a chick filet or a McDonald’s, or are you looking at some of these local one off kind of mom and pop restaurants

Jeremiah Chapman: 00:44:24

that. That’s a, that’s a really great question because obviously I want, I want to touch all of those places. The national brands, they’re completely different animal, so our near term customer as the small independent place. But really how do you get to, um, that’s, that’s the difficult part by the small independent places. They’re the ones that don’t have operations that need a lot of help that can, but also they think out the box out of the box a little bit differently, which is awesome. So we want to answer their needs and build what we want to build for that next step within the independent market because they are the largest part of the market and no one’s been able to really rally around it because everyone wants to quick hit of the national brand, but then you’d get swallowed up by them.

Jay Clouse: 00:45:15

So you say that they’re the largest part of the market. Are you saying as a whole, if you look at all the restaurants in the United States, the largest segment is independent shops,

Jeremiah Chapman: 00:45:27

correct, That is correct. Independence of the largest. They used oil, it’s industrial frying independence, and then chain restaurants they have the pretty much the most streamlined process, so they’re actually stretching the most.

Jay Clouse: 00:45:42

So the independent restaurants, are they more compliant or less compliant? Do they even have brand standards?

Jeremiah Chapman: 00:45:47

They do not really have brand standards. They have, I would say integrity in their processes, but since it’s an independent, you may have. That’s including the one offs. The multiunits, the small local chain accounts, they may have 10 to 15 and they’re starting to. They’re starting to get a standard, but they really don’t have a filtration standard yet.

Jay Clouse: 00:46:12

Are they on a restaurant per restaurant basis a profitable customer for you?

Jeremiah Chapman: 00:46:18

Yes. So that’s. That’s another part. When you’re working with national brands, your margin is going to go down significantly. So we, not only are we answering the part of the market that doesn’t have an answer currently, it’s more profitable for us and allows us to learn and change and disrupt a lot more.

Jay Clouse: 00:46:36

Do you have any numbers you can share with the listeners as far as when you say that the independents are a larger part of the National Pie, do you know what that breakdown is?

Jeremiah Chapman: 00:46:47

National accounts, there are about 200, 250,000 locations, independence or 350,000 locations making up about 65 percent of the oil spend annually. And when it comes to their average oil life, really we’re looking at less than a week on average, but the national accounts you’re looking at two weeks or so that they’re really stretching the oil. So it’s a. it’s a. it’s a much different environment. If we’re thinking about the environmental impact, that’s where we want it to be, but it’s. It’s a tall task.

Jay Clouse: 00:47:24

How much of a focus is that environmental impact on you? Because if you’re, if you’re driving both towards the sustainability goal, but also becoming a profitable fledgling business, how do you determine where you’ve spend more of your time and effort? Is this, is this something that is slowing you down?

Jeremiah Chapman: 00:47:42

So on the sustainability part, luckily our cost competitiveness and our value proposition directly align with sustainability, so we’re using plants which helps us on cost competitiveness, but then we’re also. We need to impact how much oil you use, which is a state which is the sustainability part, so it’s tied into what’s important to our business. If it’s not important to your business and you’re just trying to be sustainable. I think that’s where a lot of the friction happens and that’s really when I’m starting to think of things to develop around our product and I have to make sure that I’m not reaching for something at this moment. That is going to put a burden on our customer just to sound better. Because if it’s not answering a problem, then it’s not part of a solution that we need and it’s going to just be a bell or whistle. That could add a little bit of money on it and cause a lot of strain

Jay Clouse: 00:48:40

and I want to get into those unit economics a little bit here in a second, but one last question on the restaurant landscape because I think this is fascinating and it’s something that I don’t know a ton about. When you have these national chains like McDonald’s and subway or wherever, some of these are franchises, how does dealing with franchises affect how you deal with national brands? Do they have to go and get some approval from the mothership or do some of them operate completely independently? What does that look like?

Jeremiah Chapman: 00:49:07

Every one of them is different, so that’s. That’s the million dollar question there. Some brands you absolutely have to go to corporate first and then you have the ability to be approved to be sold to franchisees. Some large accounts, they may hold three to five percent of the of the locations so you can sell corporate, become part of the program and only get three percent of their locations and the ability to sell to all the other Franchisees, but they have to make the decision every single time, so you need to go around other brands. They may be completely like Chipotle. They’re completely corporate owned. You get one, you get all of them, which is a huge benefit, but something that’s also very difficult about the national chain. The csuite changes every seems 15 to 20 months, so the person you’re talking to, could be fired. They could be fired in the middle of a test and that’s happened to us twice actually. We were working with someone and they got moved and our traction just fell out the bottom because someone comes in with fresh ideas, so really if you want to build a business that you want to make a huge impact, you have to do that part in the national chains really fast.

Jay Clouse: 00:50:26

Is that where you started? Did you come in thinking like, this is what I’m going to do, I’m going to hit national chains, and you started with those conversations and now you’ve come around to say, actually I think independence that we can figure out how to reach them or better, or is that something you knew from the beginning that national chains would be kind of this difficult quicksand of a process,

Jeremiah Chapman: 00:50:44

so I envision doing both at the same time leveraging the scale of national chains to really offer a competitive price to the independence and grow that margin. What I did not anticipate is the long sales cycle of the national chains. If the person’s staying around with you, that sales cycle can be nine to 12 months because you prove it. You go to market tests, you go to a set request will, which larger market test. Then you start rolling out. I thought it was. You have a couple conversations. You prove it, they start implementing it, so when we first started, that process actually made us hemorrhage money because we had to show up and be in market tests for weeks at a time and a different state, so it’s nothing to spend 10 to $15,000 a month on a test where someone can be fired in the middle of it. It’s a really hard pill to swallow. Second, the independence. We knew we couldn’t knock on every single door to get the independent market, so we had to figure out what trucks are already there, who has a relationship and how can we treat this as a national account with with an independent mindset. So that’s where we had to pivot towards is realizing that we could be throwing cash down a dark hole on the national chain side if we don’t fully understand what’s going on.

Jay Clouse: 00:52:09

So the independents, you’re saying you’re trying to find channel partners who are already servicing a lot of these independence and working through them.

Jeremiah Chapman: 00:52:16

That is the way you have to do it. If you want to move fast. I do believe that we could get a pull through a drag through strategy nationally and in about six to eight months on that if we just picked and prodded and we may have 20 to 30 key customers that has gotten us nationwide, but we may be selling two or three cases a week at those places, so you’re spread all over the nation but you’re really thin, so we have to find a partnership that helps us build that density quickly.

Jay Clouse: 00:52:49

Can you talk to me about your attraction to this point? Who, how many customers you have, where they are, what type? What’s the breakup between franchises or independence.

Jeremiah Chapman: 00:52:58

We’re currently with a nine states servicing about 250 fryers. Our main customers are actually stadiums, event centers, large venues. They can’t have a filtration system. We have a few, I would call them local chain concept, so like Hattie B’s, they’re a big customer and then places here locally in Louisville is something called home run Burger. They have a better burger concept positioning, so think of five guys in and out. Everyone who’s getting a quality burger out, that’s what they’re doing. And we have a Franchisee who asked to remain anonymous at this time in California that is really giving us access to a very big, a very big opportunity, but it’s one of those where their c suite has changed three times in the past two years. So whenever you get traction and just kind of slips away. So that one’s a really difficult one. But what we, what we quickly saw the local chain concepts are really you’re able to build businesses off of them because you become their brand standard at our early, at an early age. And from that we were actually able to build a national rollout plan, which will be an effect here in September. So we’ve sold about 27,000 units in 2016. We expect to be over 500,000 units by the end of this year in 2018.

Jay Clouse: 00:54:27

Can you talk about that strategy and how you’ll get from 27,000 to 500,000?

Jeremiah Chapman: 00:54:33

That’s the partnership. That’s the partnership at play. So we found a trusted partner who believes in us to take us national and all we have to do is show them what our quote “secret sauce” is here in our midwest market, and they will employ that over the entirety of the United States.

Jay Clouse: 00:54:55

That’s exciting. So what do you ask? What do you have to. What do you have to prove to them?

Jeremiah Chapman: 00:54:59

Well really this is the. This is the. We’re in the homestretch, so we’ve proven that we’re worth taking national already and now they’re saying let’s get everything set up so we can do this the right way. So again, flying by the seat of my pants. But man, I’m excited.

Jay Clouse: 00:55:20

That’s great. What do you have to do as a business to handle that type of growth? Do you have to ramp up manufacturing or you have to get dedicated space? How do you handle that influx of growth?

Jeremiah Chapman: 00:55:30

Nice thing is as we’re able to plan around a a launch, which is great, but yes, it’s all of the above. You need to make sure your manufacturing is said really. One thing that I never thought about, you have to have your customer service and check because right now we’re in nine states, but we’re in the Midwest, so those nine states we can get to within a day if we have a problem. That’s a benefit of the midwest that allows you to really touch your customers personally, but if you’re scaling nationally, you’re not going to get to those customers fast enough, so you need to have a customer service play. You’re manufacturing your support of whatever sales channels that you’re using. All of that needs to be ready before you start because those are the things you can’t really build from scratch. When you’re going, you can change them, you can. You can mold them, you can grow them, but you need to have something in or it’ll fall on its face.

Jay Clouse: 00:56:25

If you sell 500,000 units in the next year what does that mean for your business from a unit economic standpoint on it, on every unit that you sell, what is your margin?

Jeremiah Chapman: 00:56:36

Currently we’re. We’re beating down our cost of goods because we’re hitting scale, which is awesome, so we project our margins depending on the distribution channel to be between 20 and 40 percent, but selling those 500,000 units that that really means this is our is our cashflow positive stage, so this is, this is my dream. This is no longer an expensive hobby. You’re creating enough value in the place to sustain. It’s the are you comfortable? Are you going to keep growing? So

Jay Clouse: 00:57:06

does that margin include the overhead that you might have to have in the way of transporting or storage or is that just purely, what other cost drivers do you have?

Jeremiah Chapman: 00:57:18

So that is another key reason why you want a partnership because you need to keep those costs pretty flat for right now, we know that we’re leaving a little bit on the table, but we can predict those costs now. So distribution cost, storage costs, turn times, fuel surcharges. We have all of that completely covered. So we know that we can bank on x amount of cash for y amount of units sold, which is exactly what we need because as, as you’re growing, the first thing we saw is, hey, we’re going to grow and run out of cash. That’s the most exciting and satisfying you’ll see on your cash flow, your p and l is as soon as you order those materials, you can’t pay anyone who’s making it. So it’s good to keep those costs flat so you can expect and build a strategy around it.

Jay Clouse: 00:58:06

So I know you pitched in the rise of the rest competition recently. Is that a signal of, of a fundraise, are you guys raising right now?

Jeremiah Chapman: 00:58:16

So, uh, what we’ve done is we’ve got a, a bridge going so we can get through this launch, this launch. It’s really, it’s taking us about 70 x. So it’s this national launch you’re talking about. It’s pretty crazy. But what, what we really see is as soon as we get our feet set up under us, we want to be out the door again. And when I say feed set up under us, I really mean the people in place to continue to push this along and I’m immediately going back out. So yeah. Um, and in a few months we will be raising and will be raising to go even bigger.

Jay Clouse: 00:58:53

How big is your team now, Jeremiah?

Jeremiah Chapman: 00:58:54

We have three people right now. Three people and a ton of help. I wouldn’t say that we do it all ourselves, but three people are full time and we have advisors that honestly, I don’t know why we don’t ask to be paid with how much they, they help us with. But it’s been a blessing for us

Jay Clouse: 00:59:14

And do they help a lot on understanding the market and bringing relationships or are they rolling up their sleeves and making pods?

Jeremiah Chapman: 00:59:21

Oh No, noone is making pods. But they, they definitely, they help us with the relationship. They offer a ton of guidance on strategy. But at the end of the day, it’s the three, the three, I call it the pod squad that has that. We have to make the decision on where the company needs to go. So what’s great is you have all of this input that tells you to do all of these different things. You make a decision and they don’t ask questions about the decision. They say, okay, if that’s where you’re going, here’s what you really need to do. So a lot of times advisors can really disrupt and get in the way of where you want to go. This core group believes in our abilities enough to just adhere to the vision that we have.

Jay Clouse: 01:00:05

I remembered a couple of quick hit questions. I wanted to make sure I got some some data on. I’m a restaurant. How much am I paying per unit for one of these times?

Jeremiah Chapman: 01:00:14

So if you’re a restaurant, you’re spending about 3000 bucks a year on frying oil, you’re going to spend between $1.52, $1.75, $1.80 for our pods, and we’re going to save you 25 percent while paying for the pod. So we’re going to cut that oil, spend a lot more, but then you have to pay for the pod so it washes out to at least 25 percent and you’re serving more consistent and better tasting food that tastes like it should. If you’re a large venue place, we’re saving you 150 to 200 percent on your oil life.

Jay Clouse: 01:00:51

And have you had any of these customers that you’ve gone into, if any of them turned out? Have they said we tried it? We’re not gonna use it.

Jeremiah Chapman: 01:00:57

Oh yeah. Yeah. So sometimes people say, yeah, your product made a difference, but we just like changing our oil on Tuesdays and Thursdays. So it’s really, that’s a tough one. That is a really tough one right there. But

Jay Clouse: 01:01:11

it’s just a behavior that they prefer the behavior and the process that already existed.

Jeremiah Chapman: 01:01:16

Yes. Yes. So even if they don’t have a product and you say, Hey, in this, in this restaurant right here, we have no competition, we don’t have the display. It’s anything you do, you’re displacing a legacy system. You’re it, you’re displacing a behavior. So it’s very important to realize that at every step there’s something in the place of where you want to be.

Jay Clouse: 01:01:36

Maybe I’m projecting here, but as part of that, a lot of the restaurants that you would probably go into the employees that are interacting with are they minimum wage employees

Jeremiah Chapman: 01:01:46

on the independent side there typically played, paid a little bit better, but not much. But when I say the CSUITE transitions every 15 to 20 months on national brands back a house, they’re transitioning every six months. So it’s a tough environment everywhere.

Jay Clouse: 01:02:03

I would imagine that part of the reason that behavior, consistency and wise, they want to stick to that behavior consistency is because there’s so much training and then you know, they try to make it probably as simple as they can for a lot of these people. Am I projecting or is that your experience?

Jeremiah Chapman: 01:02:19

Now if they were training, they were trained on everything that they want. The problem is they’re probably not able to train as much. So if you have consistent trend transitions to where you’re always bringing people in and out, the base of what you need in your restaurant is going to become the standard, not everything that you want, but what’s absolutely necessary, which is put the food in the refrigerator, mop the floors, turn off the fryers, everything else you want. Outside of that, you got to have staff that’s going to stick around because when you get someone in that’s really all they’re coming in with the knowledge of. I noticed a fryer can stay on all night so I’ll turn that off. So that’s typically what happens.

Jay Clouse: 01:02:58

What are the kpis that you look like you look at to see how your business is doing?

Jeremiah Chapman: 01:03:03

That’s a. that’s a good question. So really what we have is we want to look at the unit sold, but we really want to understand repeat orders and we have a ratio between samples and cases moved. So because our product is the only product in the market that doesn’t require any large upfront costs and no equipment, we have the ability to give someone some units, let them try it so they can actually see it. That’s a huge help for the restaurant. We want to make sure that we highlight, but need to make sure your ratio of samples to sales actually makes sense.

Jay Clouse: 01:03:43

Cool. I would love to project forward a little bit now and say it’s five years down the road. What does FreshFry look like five years from now?

Jeremiah Chapman: 01:03:55

Fresh right in five years does not care what your process is in the back of house. We’ve just become a part of it and the relationship is no longer transactional but contract based to where you were pretty much able to be a part of a program that rewards you based off of your habits. So instead of watching how much you spend and that you’re spending in the right amount, we’re watching to make sure that you’re getting what you deserve at that point and everything that’s around the Fryer we’re a part of. So when someone else comes in with a basic knowledge of turning off the Fryer, that’s all that they really need to know because we’re taking care of the rest. Um, and we’re doing that in a very lean no asset way.

Jay Clouse: 01:04:43

Can you explain more what you mean by a lean No asset way.

Jeremiah Chapman: 01:04:47

So whenever you think about fryers and service and anything around the Fryer, that’s part of the restaurant where someone is always showing up, taking something out. They need trucks, they need vans, they need everything and they need a lot of labor to do that. So we want to become a big player. A lot of people would think, hey, you really want to buy all of those things, but what we want to focus on is there are 280 plus different companies that have amazing people that just don’t have a national reach, but our product can be shipped anywhere in create the relationship. So we want to connect all that together. And so we don’t have to have the people, the people are already there. Let’s strengthen the relationship and moving from a transactional relationship,

Jay Clouse: 01:05:34

almost the opposite of where you are now. Right now you’re kind of looking for someone who can link you in to these large national and distributions. You’re saying you’re going to get to the point where you’re helping connect independent. Is this haulers that you’re talking about?

Jeremiah Chapman: 01:05:47

Yeah, yeah. Actually, so independent haulers have a competitive nature about them that national haulers do not and typically that means a very good thing happens at the independent or even national location, better service more consistent cleaner because they need the business more. We think there’s a huge advantage to that. So you want to connect all together,

Jay Clouse: 01:06:13

Jeremiah. There’s a couple last questions that I have and it focuses on starting a business in the Midwest and for you in Louisville specifically, can you talk about what it’s been like starting this business in Louisville? What things are a benefit to being in Louisville?

Jeremiah Chapman: 01:06:29

Absolutely. So in the board, what I believe is. Well first in Louisville, anything that has something to do with branding, franchising, national accounts, distribution, logistics and manufacturing, that’s what level does. So we have a a deep root, obviously yum brands is from Louisville, they’re headquartered in Louisville, and also the greatest minds and all of your other brands typically come from Louisville, so they have a large reach and a deep connection ups with logistics. The fact that we can get to over 50 percent of the population and under a day’s drive, all of that is really big because we really can’t afford to fly to every single place all the time, but we can make a loop and hit six different states in a matter of a couple of days, which is very big for us. now that that’s Louisville. Now when you look at the Midwest, what’s really important for a product like ours is pricing. Actually, we can afford to price this thing on the coasts at a completely different price than what the what works in the Midwest. Now, granted, a lot of people would say, well, just move to the coast. There’s a lot of people there, but when you really want to take over, take advantage of the fact that the midwest pricing is tough and if you can make it work in the Midwest, you’re gonna destroy the coasts when it comes to the pricing, when it comes to the strategy around how you’re going to sell. So those things I believe are extremely important for the Midwest.

Jay Clouse: 01:08:06

You grew up in Louisville, correct?

Jeremiah Chapman: 01:08:08

Born and raised, yeah.

Jay Clouse: 01:08:10

So are you still there because this is kind of where you’ve born and raised and you say actually this pretty well, or at this point, is it strategic to say this is the best place for FreshFry to operate?

Jeremiah Chapman: 01:08:20

Well, uh, what I would say is if we’re, if we’re looking at it in terms of happenstance, um, which I think that’s a little bit of it, but it’s more along the lines of this would have never been presented as a problem to me, a scalable problem if I wasn’t from Louisville. You see national brands everywhere where, and other places you may, you may not see that. You might not see that as a problem, but also this is the best place to be for us for a longterm vision of what we want to be. There are other hot cities. You can be in Denver, you can be in several places in Texas, Jacksonville, Atlanta. You can be at any of those places and have a really good start, but Louisville is positioned to remain the franchising capital of the world. Actually, there are people working diligently to make that happen, so what our business is positioned to do with the independence, we need to stay close to the to the place that is going to really set those things up for success for the next 10 to 20 years. So this is perfect for us to stay here really for our our next steps. So as I say, I have to loop it all around from before. Although we’re chasing that $4,000,000,000 market, you have to keep the 12 billion in mind because if we were chasing the 4 billion, we’d move. We moved somewhere else, but if we want to keep the $12 billion that is built to Louisvelle.

Jay Clouse: 01:09:47

and are there any unique challenges to being in Louisville? Are the things that being in the midwest makes difficult to grow a company?

Jeremiah Chapman: 01:09:54

Well, I think that part of that is changing, but access to capital is very big. A lot of times in the Midwest, people want to see series a style. Companies raising seed rounds. That’s very difficult because now now your moving a little bit slower. Second thing which which may or May. I think it’s helpful when it comes to interacting with other companies, but it’s kind of harmful. Sometimes a startup is sometimes we’re really, really nice, but you don’t get no’s fast enough so you think you’re doing something great and then you go somewhere else and like this doesn’t make any sense at all, but because they’re, as I said, this is changing with it. When we first got started and there were so few companies doing things are wanting to do things as big as what we were doing and the exact same area. A lot of people would think, hey, you’re thinking a little bit too much right now, why don’t you just focus on this small thing and that that can be a detriment to use to scaling big. Now. I think you could at that time you could scale companies, but something that I would love to take three, four years could take six or seven first. So to give you an example, when we first started this company, we thought that we needed to be the manufacturer of the pods at all times because it holds your, your margins pretty high, but you can’t scale a startup as a manufacturer and that is something that to this day, although it helps us negotiate with co packing and things like that, we have the knowledge base. It slowed us down tremendously. Um, but that was something that was valued in the midwest is keeping your costs of goods high because the pricing was so aggressive. So you think, hey, I can’t scale a business with 12 percent margin, but then you think longterm where you’re going to be and how do you get to that point? So that’s the, those are the challenges that I, that I’ve faced personally.

Jay Clouse: 01:11:45

That’s great. This has been great. Is there anything that I haven’t asked that I should’ve asked?

Jeremiah Chapman: 01:11:51

Well, I think we’ve, we’ve covered a lot. What I’d just like to ask you, because obviously this has a midwest focused. Why is that so important to you?

Jay Clouse: 01:12:01

Great question. We in, I say we as an Eric and I, we, we think that the midwest areas outside of Silicon Valley are a prime place to start a company for a lot of the reasons that you just spoke to things like cost of living, helping with unique, not unique economics. We have so many fortune 500 concentrated here. You can get to such a large percentage of the population and there’s a lot of talent here in the Midwest. You know something we talk about all the time here in Columbus, Ohio. You can pay a software engineer $300,000 in the valley and they’re feeling like they’re still going kind of month to month because that lifestyle and that cost of living, you pay a software engineer in Columbus, Ohio, $115,000 and You can live like a king. so you know it just the unit economics are staggeringly different here in the Midwest and I think you also find a level of resiliency here in the midwest that is unmatched. You know, and I say Midwest, but really I mean outside of the valley, I’ve got someone crashing in my apartment right now from Alaska. He’s a, he’s an, he’s an aerospace engineer. He’d former formerly of space x and he talks about the Alaska mindset all the time, of you can drive from anchorage to Juno and you’re in the wilderness. People make that drive and they pack a sleeping bag and a tent because if your truck breaks down, that’s just your life. Now you’ve got to. You’ve got to survive out there. And he talks about that resiliency in Alaska being something that he really values and I think we see something similar here in the midwest even as it comes to starting a software company or a fiscal goods company.

Jeremiah Chapman: 01:13:43

Absolutely. I appreciate that you said that sometimes you forget that. Yeah, we do like to bear down by bite on something pretty hard and not let go. So that’s great.

Jay Clouse: 01:13:54

Cool. Jeremiah, thank you for taking the time. If people want to learn more about you or about FreshFry after the show, where should they go?

Jeremiah Chapman: 01:14:01

They should go to www.freshfry.me. so.me because FreshFry.com is a fish and chips place in the UK so they got us. But yeah, it’s fresh fried dot emmy. Um, and from there it’ll link you to just, just about anything.

Jay Clouse: 01:14:20

All right. Awesome. Well thanks for taking the time and we’ll check in on you sometime in the next six to 18 months man.

Jeremiah Chapman: 01:14:27

Yeah, yeah. Exciting things will happen. So yeah, I look forward to that. Thanks Jay. I appreciate this.

Jay Clouse: 01:14:35

Alright, Eric just got done speaking with Jeremiah Chapman. Founder and CEO of FreshFry. What are we about to do here in this third segment now that you’re back?

Eric Hornung: 01:14:45

Before I jump into that, man, that was, that was interesting. That is a industry, a area that I had absolutely no exposure to besides the fact that once in a while there would be a grease fire somewhere in Westlake Ohio where I’m from, uh, in the back of a Wendy’s. That is, that is the total amount of exposure I’ve had. So it was really cool to kind of hear about that process that, that area. But we are going to jump into our verbal hypothetical deal memo. So this deal memo is hypothetical in the sense that Jay and I do not have a LP base. We are not an angel fund or a venture fund, but we are learning to be one and this helps us crystallize our thinking and serves as a way for us to look back in six to 18 months and grade ourselves on how we thought about a company and an opportunity. Jay did I miss anything?

Jay Clouse: 01:15:44

Nope. And in this section of the show, we are looking to answer four questions either explicitly or implicitly, and those are one, how committed is this founder to what are the founders chances of success in this business and in life. Three, what does winning look like in terms of revenue and my return as an investor in for why has this founder chosen this business? Eric, I know you love starting with the founder. What did you think about Jeremiah?

Eric Hornung: 01:16:12

Jeremiah was fantastic. He obviously had a little bit of a tinkerer, his mentality when it came to biofuels and has a initiators mindset when it comes to walking up to a restaurant and saying, hey, I want your, your oil, your old oil from the back, and then walking it down the street and learning how to make biodiesel or whatever he was making and then going out and selling it effectively to the Louisville. What are they called? Trams or shuttles. So I love all of that initiative. I love that curiosity. And it seems like he’s making something that people really value.

Jay Clouse: 01:16:54

Yeah. I think that really speaks to why Jeremiah chose this business. He’s just been working in this space and tinkering around with the chemistry of filtration for a long time and biodiesel as he spoke to, speaking to his commitment, something that blew me away during the interview and then relisting the interview continued to blow me away. The point in time where he quit his job when he had one customer paying him 25, maybe $30 a month. So to me that’s commitment. Sounds a little crazy, but uh, you kind of need that. I think that is a, just a very good underscore of how much he cares about this business and this opportunity. He’s been working on it in some form since 2014, leaving his job first in 2016 and being full time since that time. I love speaking to people who have a very specific technical knowledge about what it is that they’re working on.

Eric Hornung: 01:17:52

I completely agree. I think two things, to piggyback off what you just said, going back to leaving his job, chemical engineers coming out of college, especially with master’s degrees, make a lot of money. So living in Louisville, making what I will assume is a very, very healthy salary and then leaving that for one customer is incredible,

Jay Clouse: 01:18:16

which is something he spoke to directly said. Part of the reason he chose chemical engineering was because he was trying to secure the bag. Is that what the phrase that he used that I hadn’t heard before?
Eric Hornung: 01:18:24

I think that, I believe that is as the phrase,

Jay Clouse: 01:18:26

yeah, secure the bag, get the, get the salary from a, uh, a position and an education that he knew would be well paying, but yeah, working 20 to 25 hours a week on FreshFry while doing 50 to 60 hours per week at his normal job. I think that speaks to his commitment

Eric Hornung: 01:18:43

and I felt a little bit of a undertow of some sort of environmental responsibility. Your ideology. I know we didn’t get a chance to examine it deeply, but it kind of pairs with that technical understanding that, that you brought up is that this meant a lot to him to have some sort of technological solution that is environmentally and sustainably sound. And that came through in bits and pieces across the interview, although I don’t think it was ever tackled explicitly.

Jay Clouse: 01:19:16

Yeah, something that stuck out on those lines to me was speaking. It was from the beginning of his product. It was a focus of his. It was in the first version of the product that he was going and trying to sell to restaurants and what we did a tune into was this idea that the first product, because it was environmentally friendly, it had a price tag that was a little bit at a premium and too much of a premium for the restaurants to initially want to take on, but he didn’t at that point scrap the idea of being environment, environmentally conscious. He simply changed the product and figured out how to make it work at a price point the restaurants were willing to pay for.

Eric Hornung: 01:19:53

Let’s talk about that a little bit because he mentioned one of the benefits, and this isn’t something I have heard about the midwest from any of the founders we’ve talked to, but one of the benefits of being in the Midwest is that if you can make pricing work here, you can make it work anywhere. Does that speak to the cost conscious nature of midwestern companies and the fact that you have to sell at a reasonable to them rate where then you could go to the coast and inflate your price is bigger cost basis is still effective at a midwest price? I think it is a fascinating idea that I have. I have not thought of or heard.

Jay Clouse: 01:20:31

I think that is true. I think that’s what he was saying and I hadn’t thought of that either, but it brings to mind being from a small town myself, whenever I go home, I’m blown away. Even going to this small town from Columbus, Ohio, which is not a huge town blown away by the pricing of restaurants specifically the things that I can get for 2:50 or $3 at restaurants, restaurants that won’t even accept credit cards yet because they don’t want to pay the transaction fee is cash only. I think there is something to be said about how cost conscious a lot of areas in the midwest are, especially if he’s working towards independent restaurants and that’s a huge focus is.

Eric Hornung: 01:21:09

I have one quick anecdote on that. So I have lived in New York for two and a half years and my favorite ice cream spot in New York is called Van Leeuwen’s and to go get a single scoop of ice cream of Van Leeuwen’s I think is five 95 and it’s not a big scoop. It’s premium ice cream. It’s expensive ice cream. You’re getting a great quality. I think it’s some of the best ice cream I’ve ever had in the world last

Jay Clouse: 01:21:39

better than Jenny’s?

Eric Hornung: 01:21:41

Don’t put me on the spot like that last. Not going to answer on Sunday. I was in yellow springs, Ohio and we went to young’s dairy and I ordered a single scoop and a waffle cone and this thing was bigger than my head. It had a full pint of ice cream in it, I swear like it was incredible and I got one for me and then I got A. I got one for my girlfriend and together it was $8.16. I was like, I got eight times the product, maybe 10 times the product twice over for $3 more. It was an incredible.

Jay Clouse: 01:22:22

I can’t believe you’re not going to take a stance on van Leeuwen’s versus Jenny’s.

Eric Hornung: 01:22:25

I can’t believe you want me to get controversial here.

Jay Clouse: 01:22:25

That sounds like a vote for van Leeuwen’s.

Eric Hornung: 01:22:31

Jenny’s bramble berry crisp is incredible and probably better than any of the van Leeuwen’s flavors, but on average I think then Lewin’s has a better baseline of ice cream.

Jay Clouse: 01:22:45

All right. All right, well we’ll let that drop back to back to fresh fries.

Eric Hornung: 01:22:49

You’re going to get me. You’re gonna. Get me in trouble with the listeners now.

Jay Clouse: 01:22:52

It’s fine. That’s fine. You gotta you gotTa. Stand for something. It makes me think of Hamilton. Okay, so back to fresh dry, let’s talk about the market opportunity and the opportunity

Jay Clouse: 01:23:06

as an investor investing in this company. This is where I got hung up the most, trying to work through the economics here right now, $4,000,000,000 oil filtration market, which sounds like a big number, but he seems to think he kind of tops out at his potential for the fresh for Ipod at 20 to $50 million dollars in top line revenue on that market right now before he gets into this other side of the market, which is the uncompliant restaurants which represent a larger portion and he’s saying he can unlock that market. What were your initial thoughts hearing about this market size and opportunity?

Eric Hornung: 01:23:43

So I think looking at that kind of strategically yes, that that kind of makes sense. In the 25th, 20 to 40, 20 to 50 number. and then unlocking the rest of the market. My biggest question, and I think this is a question about just market sizing in general, when you talk to a startup founder, they may go to something like ibis world, which is where I believe this $4,000,000,000 number was polled and use that as kind of a all encompassing. This is what the market’s worth right now, but what I wanted to do is see, okay, based on this business model, let’s assume that fresh fried took over 100 percent of the US market. So if we look at one point six, seven, five, which I believe is the median of the price per pod that he had, and we say that, you know, there’s 365 pods per year and we just kind of round a little bit. We ended up getting to about $800 per year per customer understanding that there’s differences in price points, but let’s just look at an average. Then there’s 250,000 independent chains, 350,000 chains. And if you assume that each of them has two fryers, you get to one point 2 million fryers in the United States. Which kind of comports with his $1,000,000 number, so we multiply that $800 times at one point, $2 million friars on a yearly basis. That is only nine called a billion dollars in terms of total adjustable market. So there’s a bit of a disconnect between that 4 billion and this 1 billion and that effectively tells me that he’s pricing at a 75 percent discount to market price if that $4,000,000,000 numbers correct.

Jay Clouse: 01:25:28

That’s interesting. When you go to about it, you said $800 per customer, or are you saying $800 per fryer or per customer That has an average fryer?

Eric Hornung: 01:25:28

Per fryer, sorry

Jay Clouse: 01:25:37

Okay, perfect. Got It. That’s an interesting way to go about it. I went through some different math, which was his projections for the end of this year. He said he expects to break 500,000 units. Sold this year I took an average price of a dollar 50 per pod, which would give us $750,000. His margin, uh, if you were at 40 percent, actually 30 percent would be $225,000 of profit this year at 500 units. Obviously he’s looking at a larger vision. This is his entry point into the restaurant industry where he wants to start doing more and more services. So that expands the market. But I didn’t have a clear idea of just exactly how big. Maybe maybe you had a better vision of longer term market size.

Eric Hornung: 01:26:23

The biggest I can see this market getting without a price increase is something around that $1,000,000,000 mark and that’s, that’s assuming that there’s 100 percent retention of and they are ubiquitous across the industry and everyone who is in restaurants uses them just like they use, you know, some sort of canola oil or peanut oil or whatever. It’s just yes, if you use a Fryer, you use this, it’s just what you do, in which case there’d be some pricing power. So maybe you could increase the prices for x and then get back to that $4,000,000,000 number. So I think market size is something that I would be curious to examine further. That being said, a billion dollar market where there’s no real competitors is no real third party competitors is definitely interesting,

Jay Clouse: 01:27:13

especially if we’re coming at it from the angel investment side of things as opposed to like a series a or series b, even as a.

Eric Hornung: 01:27:21

even as a series a, if you have the proper valuation and you have the proper understanding that this is an opportunity that is going from market dominance, not getting a slice of the pie. The idea here is, I understand it is one of yes cost, but also behavioral change. The idea right now in the industry when you’re using a fryer is that you need to change the oil every. What did you say Tuesday and Thursday? That was just what they did. But if you can change that to just throwing in a pod every night before you go home and your costs go down, what did he say? Up to 150 percent. That to me is something that can have ripple effects throughout the industry. So I think it is an amazing concept. It just may take a little bit of time to establish.

Jay Clouse: 01:28:11

I agree. Especially the way he’s thinking about it, going through some of these channel partners who are already ubiquitous for the services they provide. He talked about hollers and if you know there’s a national darling of one service related to oil and he is partnered with them, they just become part of that suite. Yeah. I see where this becomes like a monopoly, essentially a dominance display for this very specific thing for this very specific customer. Yeah. This is a. This is a more niche opportunity then we’ve come across on the pod this far.

Eric Hornung: 01:28:44

Yeah, but that’s what’s exciting about it I think is its niche. It’s not. We just had a parking app on effectively and there’s, you know, how many hundreds of those that had been pitched that we’ve talked about. You’re not going to see a lot of people pitching oil adsorption pods. It’s just not a. it’s not a big. It’s not a big hairy. Everyone knows about it. Problem. It’s a niche. Harry. No one knows about it, but the people who do are in a position to make a very big difference if they do it correctly.

Jay Clouse: 01:29:16

A question reflecting back that I wish I would have dug into more. He talked about working with national chains and one that being a long process of being a difficult process because they turned the csuite every 15 to 20 months, but at the same time market tests costing 10 to $15,000 per month is something that he mentioned that I did not dig into. I have no idea where that money was coming from.

Eric Hornung: 01:29:41

I don’t either. The sales cycle is nine to 12 months and if a market test was three of those months or one of those months, that’s. That’s expensive

Eric Hornung: 01:29:51

its a huge costs for one market test, one chain.

Jay Clouse: 01:29:53

Especially if we look at just the unit economics of a chain.

Eric Hornung: 01:29:56

So I did a little bit of breakdown based on some of the numbers we we received and I found that using some of the assumptions he had that the operating profit, her pod in a given year is about $122 and the cost of acquisition of a new customer on average across both, um, independence and chains is about $175 is what he had told us outside of the interview. So you’re months to break even for a new chain is about 17 months. That’s your payback period. Looking at an independent, that same payback period is about eight months from the numbers that I can kind of cobble together.

Jay Clouse: 01:30:44

That’s interesting. So that’s another reason to go through the independent route versus the chain route. Uh, Eric, do you hear the tornado siren going by in the background here?

Eric Hornung: 01:30:54

I do. It must be Wednesday at noon. Columbus, Ohio.

Jay Clouse: 01:30:59

That’s, that’s right. Sorry about that. Listeners, if that comes through. All right, so let’s, let’s talk about 12 to 18 months from now. If you’re looking at fresh fries and opportunity, what are you looking at 12 to 18 months from now? From Jeremiah or from FreshFry?

Eric Hornung: 01:31:14

Well, there’s something that I mentioned in the intro that I think I would be keeping a eye on the macroeconomic commodities prices specifically as they relate to oil and the underlying oil components. I do believe that if we see a spike in oil prices, independence are gonna get hit harder than chains because chains tend to put some sort of derivatives pricing model in place where they can hedge their costs for, you know, a year, two years and they don’t get hit as hard on spikes. But independence. If oil prices spike, that’s a huge cost to their business. That might drive demand. Something like fresh fried that makes them able to buy less oil less often and have less of a reliance on that commodity price. I actually have two more things, so let me let you jump into one and that or something that you want to see in six to 18 months and I’ll jump back in.

Jay Clouse: 01:32:17

Biggest for me is I’m looking into two things. One, how has this national rollout with that partner looking in working, is that going well? Are they hitting these numbers of $500,000 or 500,000 pods this year? What’s that look like for the next year? What are the unit economics working with this partner? Have they continued to push their cost of goods down? Second, how close are they to getting to this vision of moving into other services related to back of house in fryers?

Eric Hornung: 01:32:46

and looking at other services, Obviously the the other oil services are very interesting. I’m kind of curious, and I don’t think this is a six to 18 months play the past that is this tech so good and patentable that licensable and other industries, other areas where there’s some sort of viscous fluid that has particles in it that needs to be cleaned. Did use laugh at viscous fluid?

Jay Clouse: 01:33:12

No, I. I respect your vocabulary

Eric Hornung: 01:33:24

and I’m thinking obviously there’s big oil. I don’t know enough about that process. It seems like it jumped to me to have some sort of adsorption component there. Maybe it’s for oil cleanups or whatever. I’m thinking about just other kinds of areas where this technology can expand to whether it’s through a licensing of the patent or it makes sense for fresh Friday to actually manage that expansion.

Jay Clouse: 01:33:47

I like those ideas. He did mention that they are patent pending, which I think is a positive for this opportunity as deep as he’s been in oil and biodiesel and all of this. I wonder. I would think that he would have some idea of whether or not that is a viable path to go and it didn’t come up and maybe it just didn’t come up, but yeah, theoretically, theoretically, if that was true, that is very interesting,

Eric Hornung: 01:34:09

right? Because that total addressable market question becomes a lot bigger and a lot wider. The final point that I want to make is really a compliment to Jeremiah and his team and his advisors. What they have done is took a inherently fixed cost business. Right, so you would normally have all these fixed costs of setting up the infrastructure to distribute, setting up x, Y, and Z, setting up your manufacturing facilities that they have somehow turned into all variable costs, which I think that’s what Jeremiah was getting to when he was saying that they were using this partner in this really important why they’re using this partner because things become more predictable and it becomes more about scaling because you know what your unit costs are and going to get those economies of scale as you expand. So I just think that that’s a very strategic, very well thought out way to go about this for something with a low price point with not a lot of margin built in and not a lot of room for error. They didn’t rely heavily on fixed costs, which I think is going to serve them well in the long run.

Jay Clouse: 01:35:16

I agree. Good points all around. Well guys, let us know what you think about this opportunity. Let us know what you think about. FreshFry, about Jeremiah, about my interview, skills, about Eric’s questions. Tweet at us at upside FM,

Eric Hornung: 01:35:29

but not about Jenny’s the van Leeuwen’s debate,

Jay Clouse: 01:35:33

not about Jenny’s of the van Leeuwen’s debate. Tweet at us at upside FM chat with us on breaker are preferred podcasting platform. Find us on braker. Add a comment to this episode. We’d love to hear from you and interact with you there. If you have somebody who would be a good guest for our show, email us. Hello@upside.FM. Eric, I’ll talk to you next week.

Eric Hornung: 01:35:33

Later

Jay Clouse: 01:35:54

That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guest, so shoot us an email at hello@upside.FM, or find us on twitter @upsideFM. Will be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know would make a good guest for our show, please email us or find us on twitter and let us know and if you love our show, please leave us a review on itunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple things we wanted to share with you at the end of the podcast, and so here we go. Eric Hornung and Jay Clouse are the founding partners of the upside podcast. At the time of this recording, we do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinion and do not reflect the opinions of deaf and Phelps Llc and its affiliates on your collective llc and its affiliates or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on this show. Thanks for listening and we’ll talk to you next week.

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Jeremiah Chapman is the founder and CEO of FreshFry.

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